Wall Street billionaire Steve Schwarzman gave a record-setting gift to his public high school — and it highlights the dire situation American schools face

Stephen Schwarzman, chairman and CEO of the Blackstone Group
REUTERS/China Daily

Public K-12 schools are facing budget shortfalls amid reductions in government funding.

Steve Schwarzman, the billionaire founder of private-equity firm Blackstone Group, recently gave a $25 million donation to his public high school.

Such donations to public K-12 schools are rare, especially compared with their private counterparts.

Given the budget shortfalls, Schwarzman recently told a group of 3,000 superintendents that public schools need to start privately fundraising the way universities and private schools do in order to stay competitive.

Many educators were enthusiastic, but others worried it would exacerbate inequality and said it was no replacement for state and local government funding.

Roughly an hour before Steve Schwarzman, the billionaire founder of private-equity giant Blackstone Group and occasional adviser to President Donald Trump, was set to deliver a speech in Nashville to a crowd of 3,000 at the National Conference on Education, he bemoaned the state of public education in the US.

"The world keeps moving faster and faster and the US is falling behind," Schwarzman told Business Insider, calling out the country's deficits in arming students with computer literacy, coding, and other skills that have grown increasingly important in the modern job economy.

Money, naturally, is a hurdle in remedying this, as Schwarzman readily acknowledges. Funding for K-12 education, which is provided mostly by state and local governments, plummeted after the recession in 2008 and in many locations still hasn't bounced back to pre-recession levels.

In 2015, the most recent year data are available, 29 states were providing less school funding per student than they were in 2008, according to analysis of US Census data by the think tank the Center on Budget Policy and Priorities.

"The middle class economically has shrunk. The monies aren't there in the same way," Schwarzman said. "I think we have to recognize that and figure out what to do about it."

One solution, as Schwarzman told some 3,000 school superintendents in his speech, is to start wooing successful alumni like himself to donate.
Center on Budget and Policy Priorities

It's a commonplace practice in higher education and in private K-12 schools, but it's rare in public school systems, as Schwarzman learned in the process of providing his own high school in Abington, Pennsylvania, a $25 million check to help modernize their campus and ramp up digital and STEM learning.

It's a record donation for the school, and among the largest ever individual donations to a single public school.

After recounting the story of his donation to the audience of superintendents, and providing practical advice for fundraising, Schwarzman called for a paradigm shift.

Rather than accepting the fate of inadequate financial resources, Schwarzman says, schools should take matters into their own hands and start raising money from alumni the way a private school would.

"I think the roadblocks are basically just tradition," Schwarzman told Business Insider. "What I'm talking about is just typically not done."

He continued: "Sometimes in life you just have to adapt."

The crowd's response to the speech was ebullient.

"People stood up and clapped and gave him a standing ovation," Amy Sichel, the superintendent of the Abington School District, told Business Insider. "It was fabulous."

"You have to be psychologically prepared to just keep asking"

Many schools would likely benefit from the low-hanging fruit of this largely untapped resource, and it's not all that complicated to get started, Schwarzman and Sichel pointed out.

In his speech, Schwarzman gave the school administrators a practical tutorial, laying out the steps: set up a 501(c)(3) charitable organization to receive gifts, start reviewing your lists of alumni and identifying people likely to have resources to help out, and then, perhaps most difficult, start making the ask — and prepare to hear "no" a lot.

"Part of it is, if you've never done this type of work in terms of raising money, it's preparing people psychologically for the difficulty of asking," Schwarzman said. "You have to be psychologically prepared to just keep asking."

Sichel did just that with Schwarzman, who worked with her on crafting a proposal and added some conditions to his gift — including commitments to computer science and coding in the curriculum as well as professional development and training for school counselors to better prepare students for college and their careers.

While Schwarzman's gift, which will fill the shortfall in Abington's ambitious $100 million high school renovation project, will have a tremendous impact on the roughly 8,100-student school district, is it a realistic model for solving funding gaps on a broader scale?

Not every school has a billionaire alumnus

Regardless of fortitude and determination, some districts will have more potential funds to mine than others. Not every school has an alumnus like Schwarzman, who has deep pockets and an enduring commitment to education — he has donated hundreds of millions to a variety of education causes.

"School districts' reliance on private funding is slim-to-none," Corcoran said, "but where it does exist it tends to be in wealthier communities."

Corcoran said he had mixed feelings hearing about Schwarzman's gift and "paradigm shift," because on one hand, he's always excited to "hear cases when those of means give back to public schools," but on the other hand, "it's been a long, uphill battle to improve equity in school funding across the US."

A slew of lawsuits across US states since the 1970s have resulted in some redistribution in school funding within states to address inequality. But significant gaps still persist in part because local funding provided by cities — and typically raised by property taxes — accounts for a large proportion of budgets.

Wealthy cities with sky-high property values can raise more money than low-income locales.

Corcoran worries that a broader movement of communities tapping private donors to fund public education could roll back what strides have been made on education equality, ultimately not providing much help to the schools and students who need it most.

Still, private funding is a drop in the bucket at this point, and many schools are facing real budget shortfalls. Corcoran isn't angling to cut schools off from a potential source of revenue.

"I wouldn't want to deny any superintendents from using those opportunities," Corcoran said.

Not a panacea

But he doesn't believe the notion represents a realistic cure for public school funding ills, and he says it would become a problem if people started treating private donations as a substitute for local tax dollars and state aid.

Sichel, despite her district's recent good fortune, isn't convinced private donations are a magic elixir or a replacement for public funding, either. She points out that Schwarzman's gift is not a substitute for a district operating budget, which in Abington currently stands at $159 million, 28% of which comes from local funds.

"In Abington, this is not replacing an operating budget at all. This is $25 million for a targeted gift for building and renovating a high school. It's a very targeted gift," she said.

But, she says, to stay competitive and offer students the best programs and opportunities, public schools have to give it a try.

"This may not be a panacea, but it sure is another avenue to pursue," she said.